Kaustubh Kulkarni Mumbai

GLAXOSMITHKLINE (GSK) plans to spend more than $1 billion (R8.86bn) to raise stakes in its Indian and Nigerian consumer health-care arms, as Britain’s biggest medicine maker deepens its footprint in emerging markets and in non-prescription consumer health.

The deals are the latest of several by GSK, which is reducing its reliance on traditional regulated markets in Western economies, where sales are slowing.

GSK said yesterday that it would buy up to an additional 31.8 percent stake in India’s GlaxoSmithKline Consumer Healthcare for about $940 million by paying 3 900 rupees (R620) a share in an open offer, a premium of 28 percent to the stock’s Friday close.

On similar lines, GSK said it was planning to raise the stake in its Nigerian consumer products unit to 80 percent from 46.4 percent now in a $98m deal.

After the offer, GSK’s stake in the Indian consumer products arm will increase to 75 percent from 43.2 percent.

“The offer shows their commitment to India business,” said Daljeet Kohli, the head of research at brokerage IndiaNivesh in Mumbai.

“Also, having 75 percent control is as good as having full control. You can take any decision or pass any resolution you want,” he added.

Under Indian regulations, controlling shareholders can own up to a maximum 75 percent in a listed company and are not obliged to make an offer for the remaining 25 percent, which has to be in public hands for the company to remain listed. GSK said it did not plan to de-list the Indian unit.

GSK Consumer Healthcare shares jumped 20 percent, to a record high in Mumbai on the move by the UK parent.

GSK said the Indian and Nigerian transactions would be funded through existing cash resources and would not affect expectations for the group’s long-term share buy-back programme.

The Indian transaction, for which the offer period would begin in January, would be earnings neutral for the first year and boost earnings thereafter, it added.

The Indian arm also sells popular brands such as health drink Horlicks, malt-based drink Boost and multi-vitamin drink VitaHealth, which is marketed to women. It also markets over-the-counter medicines such as paracetamol tablet Crocin, pain killer gel Iodex and acidity reliever Eno.

Tough market conditions in Europe have hampered GSK’s hopes for a return to sales growth this year, although the company’s growing business in emerging markets and its large consumer healthcare operation are both doing well.

In India, for example, sales of the consumer unit’s flagship Horlicks beverage brand stood at £270m (R3.8bn) in the year to December last year, contributing nearly 75 percent of its total revenues.

“A lot of the current business of Horlicks is in the south and the east of India. So there is still a great opportunity to increase the penetration to the north and the west,” GSK chief strategy officer David Redfern said yesterday. – Reuters